Real estate once again drawing attention despite political crisis

The acquisition of real estate assets is once again drawing the attention of asset managers focused on the industry, despite the intensification of the political crisis in the country. The asset managers look at the long term and get ready for the moment in which the economy resumes growth and starts heating up demand, mainly for warehouses and office space. There are those who are also interested in the residential segment. There are talks for new financing efforts, and those who already have firm funds available seek assets for disbursing part of them.

Even with the worsening of the political crisis, Hemisfério Sul Investimentos (HSI), Brazil’s largest platform for real estate private-equity funds, maintains its intention announced in January of disbursing between R$1 billion and R$1.5 billion in the purchase of assets this year. “It’s not a temporary hiccup that’s going to change our strategy, with which we remain optimistic,” said Thiago Costa, the HIS partner responsible for acquisitions. Resources for financing acquisitions are part of a $750 million fund for which financing was concluded one year ago.

HSI – which has R$10 billion in assets under management – is interested in warehouses, residential segment, office space and shopping centers. In the first quarter, HSI bought a finished warehouse and two under construction. In the residential segment, the asset manager has purchased land and announced in April a joint venture with Nortis, of businessman Carlos Terepins, for the development of residential projects of medium and high standards in the city of São Paulo, to be launched in early 2018.

“Short term volatility can’t mask long-term opportunities, says RB Capital partner, Marcelo Michaluá. RB’s main bet are well-located distribution centers. The company has R$2 billion in assets under management invested in real estate and infrastructure funds.

Hedge Investments announced that it plans to begin raising money in the second half through funds – totaling between R$1 billion to R$1.2 billion – for real estate investments in warehouses, office space and shopping centers. The financing will be carried out over 18 months.

André Freitas, a partner at Hedge, thinks the industry’s recovery will take place first in the warehouse segment, likely by the year’s end. Potential tenants have already begun to seek, Mr. Freitas said, construction projects built to suit. The asset manager hopes for an improvement in the office-space market in two years, but believes that the recovery for Triple A standard spaces could begin in 2018. The expectation for the shopping center segment is for the recovery to occur in three years.

Credit Suisse Hedging-Griffo (CSHG) — which has R$5 billion in real estate assets under management and oversees 45 ventures – has already announced that it plans to raise new capital through a real estate investment fund (FII). CSHG plans to double the total amount of assets under management within three years.

For Bruno Laskowsky, director for real estate assets at CSHG, the markets for commercial office space, shopping centers and warehouses are likely to resume growth in late 2018 or in 2019. This year the asset manager will focus on increasing profitability of office space, shopping centers and warehouses segments, with the reduction of vacancy and improvement of asset quality.

Brio, whose control is shared by Jereissati Participações and Sollers Investimentos will raise in the coming months more than R$100 million for investment in the medium-high and high-income residential segment. The asset manager focused on the real estate market spent three years practically in a holding pattern.

Brio plans to use the proceeds to buy stakes in medium-high and high standard residential projects in São Paulo, that are less dependent on bank financing. The asset manager believes the perspective the country will advance reforms justifies its expectation of economic recovery.

RBR Asset Management, which has R$700 million under management distributed in six investment vehicles, recently purchased its first corporate building in São Paulo for R$41.3 million. The asset manager intends to make new acquisitions of corporate properties for lease in well-located areas in the city.

In the residential segment, RBR purchased four plots — three of them with a profile suited to federal program My House, My Life — and will acquire four to six other areas this year. The payment of land will be made only after the projects’ development registration. “Brazil still brings many uncertainties, says one of RBR’s partners, Ricardo Almendra. Projects under the housing program will be launched this year, while ventures for the middle and upper-middle classes, starting in 2019.

Mr. Almendra said the investments planned for development are maintained, even with the worsening of the political crisis, but “filters for debt transactions have become more restrictive.” RBR purchases real estate receivables certificates (CRIs) and participates in the issue of these securities.

The coordinator for real estate investments at Provence, Vitor Morosine, says that the company’s perception is that there are more opportunities in the 2 and 3 income brackets of My House, My Life housing program, financed with resources from the Workers’ Severance Fund (FGTS), and high standard properties, which depend less on credit. “But what’s most important is that they are very good partners in what they do and that they have proven experience,” Mr. Morosine said.

Source: Valor Econômico